Claude Davis, President and Chief Executive Officer commented, "This transaction allows us to accelerate our planned growth in the greater Dayton area, one of our key strategic markets, and provides a solid entry point for the Wilmington market where Liberty is well established. The acquisition of this branch network and accompanying loan portfolio provides immediate scale and operating profitability in these markets that would otherwise take several years to accomplish on a de novo basis.
"Liberty has built a strong deposit franchise in its core Ohio markets and employs a client-centric business model similar to ours. As a result, we are assuming a low-cost, transaction and savings account-oriented deposit base that resembles our existing portfolio and we anticipate a seamless transition as we welcome Liberty's customers to First Financial. We expect to leverage the First Financial brand and breadth of product offerings to provide a wide range of services to the Liberty client base and drive strong growth in these markets where our presence will be greatly enhanced."
Under the terms of the purchase and assumption agreement, First Financial will pay a 6.41% net premium on deposits, or $22.2 million based on the deposit balance mentioned above. The assumed deposits consist of approximately 59% transaction and savings accounts, 30% retail time deposits and 11% jumbo time deposits, and had a cost of funds of approximately 72 basis points for the month of March 2011.
The loans to be purchased consist entirely of in-market, performing loans that were selected after an extensive credit review. The acquired loan portfolio composition includes approximately 38% residential mortgages, 37% commercial real estate and multifamily loans and 20% home equity loans and has a weighted average coupon of approximately 5.61%.
First Financial expects the transaction to be accretive to 2012 diluted earnings per share and estimates that it will be approximately 4.2% dilutive to tangible book value per share upon closing. However, as a result of the strong projected future earnings contribution from the acquired operations, the Company expects to recapture tangible book value dilution within approximately three-and-a-half years.